The interest rates banks pay on $18 trillion in deposits lags behind the fed-funds rate by the largest gap on record, according to a New York Fed paper.
The interest rates banks pay on $18 trillion in deposits lags behind the fed-funds rate by the largest gap on record, according to a New York Fed paper, but that may be about to change.
Bank deposits are in focus for investors rattled by runs on institutions last month following the collapse of three regional lenders. But the paper, by economists Alena Kang-Landsberg, Stephan Luck and Matthew Plosser, highlighted the opportunity cost for depositors compared with other, higher-yielding investment vehicles, including money-market mutual funds.
The researchers also found that banks are paying higher rates on 12-month certificates of deposits and other vehicles while keeping rates on checking and savings accounts low.The research shows rates offered for 12-month CDs have risen more than for money-market deposit accounts, they said, which in turn were more responsive than savings accounts, which were more responsive than checking accounts.
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